Morgan Stanley increases holding in Rocket Lab (RKLB.US): Acquires Iridium Communications (IRDM.US) to complete communication puzzle, mirroring SpaceX's integrated space path.

Morgan Stanley recently released a in-depth research report on Rocket Lab (RKLB.US). Rocket Lab officially announced the acquisition of Iridium Communications Inc. (IRDM.US) in June 2026, and the transaction is expected to be completed in mid-2027. This acquisition marks a strategic turning point for the company, transitioning from a single rocket launch provider to a full-space platform across the industry chain. Based on the upgrade in strategic logic, Morgan Stanley maintains a "hold" rating on Rocket Lab, with a base target price of $105 and an optimistic scenario target price raised from $185 to $293. The risk-return ratio is 4.8 times, with significant more upside potential than downside risk. The total offer price for the acquisition transaction is $54 per share, a 24.1% premium over the previous IRDM share price, and is to be paid half in cash and half in stock. After deducting cash and adding target debt, the enterprise valuation is approximately $7.587 billion. IRDM holds rare global L-band spectrum, 66 operating satellites in orbit, and 2.5 million government and enterprise users. It achieved nearly $872 million in revenue in 2025, with an EBITDA profit margin of up to 57%, which can provide stable cash flow for Rocket Lab and save them from the huge capital expenditure and construction period of building a low-orbit constellation. The report from Morgan Stanley clearly states that Rocket Lab's acquisition of IRDM is not to compete with SpaceX's Starlink broadband business. The two companies are in different competitive lanes: Iridium focuses on low-bandwidth, high-reliability government and enterprise key mission communications, while Starlink focuses on mass high-speed broadband internet access, with only a slight overlap in future satellite-to-mobile service. By leveraging the synergy of launch, satellite manufacturing, and satellite communication, Rocket Lab is replicating SpaceX's "vertical integration" business model and becoming the world's second-largest core player in the aerospace industry. Comparing Rocket Lab with the leading SpaceX, the report shows that although there is a significant difference in scale between the two companies, Rocket Lab has a stronger long-term growth potential. In terms of market value, Rocket Lab is approximately $62.3 billion, only 2.8% of SpaceX's market value of $2.23 trillion. Rocket Lab's expected revenue in 2026 is $923 million, only 2.1% of SpaceX's revenue, with a significant gap in satellite numbers, launch capacity, and subscriber base. On the cost side, SpaceX has a significant advantage with their Starship super-heavy reusable rocket, with a projected cost of only $515 per kilogram to orbit by 2030, while Rocket Lab's Neutron medium-sized rocket has a unit cost of approximately $1,731 per kilogram. However, in terms of growth speed, Rocket Lab has more elasticity. From 2025 to 2028, the compound annual revenue growth rate is 45%, with a launch business growth rate of 57%, significantly higher than SpaceX's launch business growth rate of 22%. The gross profit compound growth rate of the launch sector is 69% for Rocket Lab, compared to only 15% for SpaceX. As for products, Rocket Lab currently has the mature small rocket Electron and is developing the medium-sized reusable rocket Neutron, scheduled for its first flight in 2027. This will complement the capability to launch medium to large payloads. The plan is for Electron to launch 50 times per year and Neutron 18 times per year by 2030, continuously reducing the cost of launches. In the field of AI and orbital computing power, SpaceX has deployed ground-based supercomputers and plans to launch in-orbit computing power satellites in 2028, while Rocket Lab can only provide aerospace hardware support with no revenue currently generated from computing power. Financially, Rocket Lab is still in the investment phase, with continuous losses from 2025 to 2027, positive EBITDA expected in 2027, and net profit and free cash flow turning positive in 2028. In contrast, SpaceX is currently profitable, and profits are expected to explode after the Starship is fully operational. Overall, Rocket Lab, depending on its smaller base and the incremental business from Iridium communications, is expected to continue outperforming the industry leaders in revenue and profit growth. Valuation and risks: Long-term potential with short-term reliance on rocket development Morgan Stanley has set three valuation scenarios in the report, clearly distinguishing the range of individual stock returns. The optimistic scenario target price is $293, calculated by giving Rocket Lab a 10% growth space corresponding to SpaceX's aerospace sector valuation. This is premised on the successful development and implementation of the Neutron rocket, the complete release of the value of the Iridium communication business, and an upward potential exceeding 250%. The base scenario target price is $105, with a 30% discount compared to SpaceX's valuation. The discount is due to uncertainty in the development of the medium rocket and the integration of the communication business, with an upward potential of 25.88%. The pessimistic scenario target price is $40, assuming delays in Neutron development, frequent launch failures, and underperformance in reuse technology. If the revenue in 2030 only reaches 60% of the optimistic scenario, the stock price could drop by over 52%. Option implied data shows that the likelihood of reaching the optimistic price is close to zero, a 34.6% probability of falling below the pessimistic price, and an approximately 12.6% probability of reaching the base target price. Morgan Stanley also outlines multiple core risks and investment logic. Upside catalysts include: continuous demand driven by low-orbit mega-constellation construction, the long-term barrier formed by Iridium's scarce spectrum, the acquisition of Space Siasun Robot & Automation to enhance on-orbit service layout, and stable government aerospace order volume. Downside risks focus on delays in Neutron rocket development, industry price wars compressing profits, third-party competition in the Iridium acquisition leading to transaction termination, prolonged capital expenditure lengthening the profitability cycle, and spectrum regulation changes weakening the core asset value of Iridium. Overall, Morgan Stanley judges that the long-term prospects in the aerospace industry are solid, and Rocket Lab has filled the gaps in its business by acquiring Iridium Communications, building a differentiated integrated aerospace platform compared to SpaceX. Although the company still faces short-term losses and uncertainty in research and development, the higher growth potential and the rare communication assets open the door to long-term valuation upside, making the risk-return ratio attractive and worthwhile as an investment. The key variables are focused on the progress of the medium rocket Neutron and the integration of the Iridium communication business.